Selling Guide

Published October 2, 2019

A2-2-01: Contractual Representations and Warranties (04/03/2019)

This topic contains information on contractual representations and warranties, including:

Representations and Warranties

In order to sell loans to Fannie Mae or deliver pools of loans to Fannie Mae for MBS, the lender makes representations and warranties as to certain facts and circumstances concerning the lender and the mortgage loans it is selling or delivering. The MSSC contains specific representations and warranties. Additional representations and warranties are contained in this Guide and elsewhere in the Lender Contract. Violation of any representation or warranty is a breach of the Lender Contract, including the warranty that the loan complies with all applicable requirements of the Lender Contract, which provides Fannie Mae with certain rights and remedies.

All selling representations and warranties are made to Fannie Mae as of the date a lender transfers mortgage loans to Fannie Mae and continue and survive:

  • the sale of mortgage loans to Fannie Mae or delivery of pools of mortgage loans for Fannie Mae MBS,

  • any subsequent resale of the mortgage loans by Fannie Mae, and

  • termination of the MSSC and any agreement that is part of the Lender Contract unless Fannie Mae expressly releases the lender from them in writing.

The lender makes each representation and warranty set forth in the Lender Contract separately and independently from every other warranty it makes for a specific mortgage.

Representations and warranties are not limited to matters of which the lender had knowledge, except for the warranties numbered 10, 11, and 17 of Section IV, A: Specific Warranties, of the MSSC, which are violated only if the lender had knowledge of the untruth or, acting as a prudent lender, should have known about it through the exercise of due diligence. Although warranty number 17 is limited to matters of which the lender has knowledge or, as a prudent lender, should have discovered, this limitation does not in any way limit the lender’s warranty number 1 that the mortgage meets all applicable requirements in the Lender Contract, nor does it affect any other warranty. Lenders are deemed to know matters that are of public record.

Because the selling warranties are not limited to matters within a lender’s knowledge, except as noted above, the action or inaction (including misrepresentation or fraud) of the borrower, or a third party, as well as the action or inaction (including misrepresentation or fraud) of the lender will constitute the lender’s breach of a selling warranty.

A lender that acquires the servicing of a mortgage loan, either concurrently with or subsequent to Fannie Mae’s purchase of the mortgage loan, assumes and is responsible for the same selling warranties that the party responsible for the selling representations and warranties made when the mortgage loan was sold to Fannie Mae. When a servicer transfers its contractual right to service some or all of its servicing responsibilities to another Fannie Mae-approved servicer, any variance or waiver granted to a transferor servicer does not automatically transfer to the transferee servicer. In addition, the transferor servicer and transferee servicer must ensure that all existing special servicing obligations associated with the transferred mortgage loan are disclosed.

Note: Fannie Mae will not exercise its rights to enforce certain remedies for breaches of certain representations and warranties for loans meeting the requirements set forth in A2-2.1-04, Limited Waiver and Enforcement Relief of Representations and Warranties for Mortgages Submitted to DU, and A2-3.2-02, Enforcement Relief for Breaches of Certain Representations and Warranties Related to Underwriting and Eligibility.

Lender Reporting Requirements

The lender must notify Fannie Mae within 30 days if, after conducting due diligence, it determines that a breach of a selling warranty has likely occurred, by using the self-report functionality in Loan Quality Connect. For additional information on a lender’s responsibilities for self-reporting to Fannie Mae, refer to D1-3-06, Lender Post-Closing Quality Control Reporting, Record Retention, and Audit. For additional information on a lender’s reporting responsibilities with respect to misrepresentation or fraud, refer to A3-4-03, Preventing, Detecting, and Reporting Mortgage Fraud.

Related Announcements

The table below provides references to the Announcements that have been issued that are related to this topic.

Announcements Issue Date
Announcement SEL-2019-03 April 03, 2019
Announcement SEL-2016–08 October 24, 2016
Announcement SEL-2016–02 February 23, 2016
Announcement SEL-2015–12 November 3, 2015
Announcement SEL-2014–10 July 29, 2014
Announcement SEL-2013–03 April 9, 2013